Irish Bank in Capital Crisis Sells Artworks; Others May Follow

By Scott Reyburn -
Sep 7, 2010

Bank of Ireland Plc is to start
selling its art collection after Standard & Poor’s estimated the
government-backed recapitalizing of the banking system may cost
as much as 50 billion euros ($64 billion).

The collection, begun in the 1970s primarily to support
emerging Irish artists, has about 2,000 works including local
favorites such as Paul Henry, Louis le Brocquy and Robert
Ballagh. It is expected to raise more than 4 million euros ($5.1
million) in funds for charity over the next five years, Audrey
Nolan, the bank’s head of corporate social responsibility, said.

The sale by the country’s biggest lender by market value,
which said Aug.11 its first-half profit fell 66 percent, may be
followed by some of its rivals, which also have art collections
and made losses in the first half. Bad debts also surged at
Allied Irish Banks Plc and Anglo Irish Bank Corp. after a
decade-long real-estate boom collapsed during the credit crisis.
Debts could be reduced by state aid or larger asset sales; S&P
on Aug. 24 cut Ireland’s credit rating to AA-, the lowest since
1995, and raised its estimate for the cost of the rescue from
the previous figure of 35 billion euros.

“It’s an exercise in face-saving,” Dominic Milmo-Penny, a
Dublin-based art dealer, said in an interview. “The banks have
to show they’re doing the right thing. It’s not going to have
much of an effect on their financial situation.”

Charity, Tax

Proceeds from future sales will be added to the company’s
existing community and charitable investment program, the Bank
of Ireland said in an e-mailed statement. In recent years, a
number of higher-value works, including paintings by Jack. B.
Yeats, have been donated to the Irish Museum of Modern Art in
lieu of corporation tax, Nolan said.

The most valuable works in the Bank of Ireland collection
would currently be estimated at about 100,000 euros each, said
James O’Halloran, managing director of the Dublin-based
auctioneers James Adam & Sons Ltd., who last month was appointed
sole adviser to the Bank of Ireland on the dispersal.

“We’re going to suggest auction to be the best way to sell
most of the best pieces,” O’Halloran said in an interview.
“There are a lot of lesser things that aren’t sellable and are
better off left where they are.”

Demand for Ireland’s art has declined along with its real-
estate market. During the boom “Celtic Tiger” years, wealthy
private and corporate collectors paid record prices at Sotheby’s
and Christie’s International auctions of Irish art in London.

Postwar paintings by Yeats and le Brocquy sold for 1.1
million pounds and 1.2 million pounds respectively in 2001 and
2000. Christie’s held its last standalone Irish art auction in
2008. Only 41 percent of the lots at Sotheby’s May sale in
London were successful.

Prices Drop

Prices of some contemporary Irish artists have fallen by
more than 50 percent since the financial crisis, said
O’Halloran. As yet, no date has been fixed for the first Bank of
Ireland art sale, he said.

Dealers are awaiting news on the artworks belonging to
Allied Irish Banks and the nationalized Anglo Irish Bank.

“It’s well known that Allied has the best collection,”
said O’Halloran. “It’s much broader in scope.” The bank’s art
purchases in recent decades include works by contemporary Irish
artists with international reputations such as Sean Scully and
William Scott, as well as paintings by Yeats and tapestries by
le Brocquy, dealers said.

“We haven’t made a decision yet,” Jacqui McCrum, Allied’s
corporate social responsibility manager, said in response to the
question on if the bank’s art collection would be offered for
sale. “Everything is being reviewed at the moment.”

Cowen’s Support

Irish Prime Minister Brian Cowen said in an interview on
Bloomberg Television’s “InBusiness” with Margaret Brennan in
New York on July 12 that Allied Irish may need more state
support to meet new capital targets.

“They have to sell some of their assets that are non-
core,” Cowen said.

Anglo Irish, nationalized last year, has a more modest
corporate collection of works, mainly by Irish contemporary
artists, said dealers.

“Any decisions about the future of the collection have to
be made by the board with respect to the finance minister,”
Martha Kavanagh, a spokeswoman at Drury Communications, Anglo
Irish Bank’s external public relations agency, said in an
interview. “The minister will have the final say. The art
collection isn’t top of the priorities at the moment.”

“If all these works come on the market, I don’t know who’s
going buy them,’ Milmo-Penny said. ‘‘Most of the people who had
the space to put a bank-sized painting on the wall have gone
bankrupt.”

(Scott Reyburn writes about the art market for Muse, the
arts and culture section of Bloomberg News. Opinions expressed
are his own.)

To contact the writer on the story:
Scott Reyburn in London at sreyburn@hotmail.com.